Daily Archives: September 2, 2010

Pay Credit Card Or Mortgage?

People behind on credit cards declined, but people behind on mortgage payments increased.


Don’t people value their home more than a credit card?

That was the conventional wisdom, which a friend of mine points out is usually neither conventional or wise.

The CNBC story linked to above wrongly states that mortgages are non-recourse loans.

This is true in some states.

It is a matter of state law, California and other states, not Michigan, allow mortgage companies to foreclose and get title to the home, but prohibit them from suing the homeowner if the value of the home does not cover the debt.

It is true that it takes a long time, usually a year or more in Michigan, to foreclose.

So you can skip those mortgage payments for many months before actually having to move.

Free living I understand, buy why pay credit cards with that money?

Why not save for another place to live, which you will surely need more than a credit card.

Yra Harris, quoted in the CNBC story, blames the bankruptcy law changes of 2005.

I am not buying that.

Some Americans have learned, debt is bad.

They are getting out of it by: paying it off!

We have the raw statistics on credit card defaults and mortgage defaults, but it is sheer speculation to say that people without enough dollars to pay both are paying the credit cards.

I am sure many are, but not enough to explain the statistics.

When your home is underwater, worth say $100,000 and you owe $200,000, you see the government taking your tax money to bail out the mortgage companies, your income goes down, why pay that mortgage?

Especially if you live in one of the states where they can’t come after you for the money.

Credit card companies can sue in every state.

Now, if your mortgage payment is $2,000, and you have $1,000 per month in credit cards, you can keep paying them, and save $1,000 per month for your next place to live.

If these are issues for you, check with a qualified attorney in your state; make sure you know what law applies to you before making decisions.

Pay Credit Card Or Mortgage?

Pay Credit Card Or Mortgage?

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